Wednesday, April 17, 2013

There is a
growing consensus that a new Digital Age Communications Act is needed that reflects
the technologically dynamic, increasingly competitive digital age
communications marketplace. The current "smokestack" regime, grounded
in outdated techno-functional constructs that apply differential regulatory
burdens to comparable competitive services, needs to go.

But it is also
pretty clear that it may be some time before the growing consensus leads to
adoption of the necessary radical overhaul of the current law.

In the meantime,
Congress could simply modify one provision of the current law to require the
Federal Communications Commission to act in a less regulatory fashion than the
agency generally does now.

Section 10, the "forbearance
provision," mandates that the Commission "shall forbear" from applying any regulation or statutory
provision if the agency determines enforcement of such requirement "is not
necessary" to ensure that a telecommunications carrier's charges and practices
are reasonable and "not necessary for the protection of consumers,"
and that forbearance is consistent with the public interest.

This provision
is unique among regulatory statues, and Congress obviously intended the FCC to
use it as a deregulatory tool. For example, under the provision, if the
Commission does not deny a forbearance petition within the requisite statutory
period, it is "deemed granted." In other words, by its terms, the
statute evidences a deregulatory intention.

As we have detailed
over the years at the Free State Foundation, the FCC has employed its
forbearance authority too sparingly, often refusing to acknowledge new realities
that, in effect, mean consumers can be protected more effectively by the
competitive marketplace than by outdated legacy regulations. For example, as my
colleague Seth Cooper has demonstrated in "Forbearance Follies" and
elsewhere, in denying several petitions for forbearance relief the agency
simply dismissed wireless service as a competitive alternative to wireline
service. The Commission acted this way despite the fact that over 30% of U.S.
households have discontinued their wireline service.

As I suggested
in April 2011, to redress the FCC's reluctance to grant warranted regulatory
relief, a sentence could be added at the end of Section 10(a) to the effect
that: "In making the foregoing determinations, absent clear and convincing
evidence to the contrary, the Commission shall presume that enforcement of such
regulation or provision is not necessary to ensure that a telecommunications
carrier's charges or practices are not unreasonable or unreasonably
discriminatory or necessary for the protection of consumers and is consistent
with the public interest."

I explained in
the "Modest Proposal" essay that
establishing such an deregulatory evidentiary presumption in Section 10
"would not dictate the outcome
of the Commission's assessment of any particular forbearance petition." That
is not the intent.

"But the
presumption would require the Commission to grant regulatory relief absent the
presentation of convincing evidence to the effect that the requisite consumer
protection and public interest showings have not been made. This should make it
more difficult, for example, for the Commission to ignore or minimize the
significance of evidence of wireless substitution for wireline in performing a
competition analysis."

I made in clear
in a blog posted in May 20111 that the amended
forbearance provision incorporating the deregulatory evidentiary presumption
should apply not only to telecom carriers, as is presently the case, but as
well to cable operators and other entities regulated by the Commission. There
is no reason that any entity subject to a Commission regulatory mandate should
not be eligible to seek relief.

It is a hopeful
sign that there is increasing support for reform of the forbearance process as
a means of granting regulatory relief when justified by competitive marketplace
realities. In his superb keynote address at FSF's March 21 Fifth
Annual Telecom Policy Conference, I was especially gratified that Senator Marco
Rubio declared that the forbearance process should be reformed "so it is
more difficult for the FCC to reject regulatory relief petitions when they are
justified." This is exactly right.

And, along the
same lines, in his Conversation with me, Commissioner Pai stated that there is "no
question the telecommunication marketplace in particular has undergone
revolutionary change" and that it "is much more competitive than it
has ever been." He agreed that my forbearance proposal was
"interesting" because the Commission should be "more liberal in
its application of forbearance authority."

Immediately
below, and also here, are links to the videos of Senator
Rubio's keynote and the Conversation
with Commissioner Pai. Of course, in addition to the remarks relating to
forbearance, there is much more of value for those of a reform-minded bent.

But, today, I am
focusing on reforming the Communications Act's forbearance provision by
inclusion of a deregulatory evidentiary presumption along the lines I have
suggested in my proposal.

Pending a
much-needed wholesale overhaul of the Communications Act, reforming the
forbearance process offers an interim avenue for spurring the FCC, more
regularly, to grant justified regulatory relief that comports with the
competitive realities of today's digital marketplace environment.

I hope some
reform-minded Senator or Representative – or a whole group of them – will pick
up the reform cudgel and lead the effort.